Gdp .. Measure of Welfare ?

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ENPC-EHTP-MBAXIV A

MA 1407 : Business Economics in a Global Market Individual Assignment GDP vs. Welfare The Moroccan Example

Othmane Bouzoubaa Student ID : MA14 - 016 April – May 2012

This paper emphasis on GDP as an inefficient measure of welfare using arguments from the Moroccan example.

MBAXIV A – MA 1407 – Business Economics in a Global Market GDP & Welfare – The Moroccan Example

Table of Contents
1. 2. 2.1 2.2 2.3 3. 3.1 3.2 4. 5. Introduction .................................................................................................................................... 3 From GDP to Welfare................................................................................................................... 3 GDP Purpose & Limitations .................................................................................................... 4 Some Initiatives towards Welfare Measurement ................................................................. 4 Happiness and Life Satisfaction ............................................................................................. 5 The Moroccan Example ............................................................................................................... 6 Morocco’s GDP & Economic Health ...................................................................................... 6 Morocco’s Welfare .................................................................................................................... 6 Conclusion ..................................................................................................................................... 9 References................................................................................................................................... 10

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MBAXIV A – MA 1407 – Business Economics in a Global Market GDP & Welfare – The Moroccan Example

1. Introduction
GDP measures the market value of final goods and services produced within a country in a given period. It is the most widely followed metric for assessing an economy’s performance. Economic well being, still restricted to material aspects, is influenced by; in addition to parts of GDP, non market activity, leisure, wealth, unemployment and income inequality. Individual living conditions include non material aspects as health, life expectancy, education and environment. Happiness, as the ultimate goal, does not change much over time as it depends on family, friends, work satisfaction, not much on income. Hence, GDP (a frequently varying and objective measure based on raw formulas and numbers) can definitely not be an accurate measure of a nation welfare (or happiness, by far more subjective and non-changing in nature.) As discussed in the previous paragraph, there are several layers we need to go through from GDP in order to reach welfare. Each layer will inevitably impose encompassing new considerations in finding the ‘right’ measure for welfare, should the latter be initially based on GDP. To illustrate, the figure below shows a relatively low economic well being in spite of a high GDP per capita for USA, while it depicts a relatively high economic well being in spite of a low GDP per capita for France. In both countries overall happiness and life satisfaction are quite steady over time.

2. From GDP to Welfare
Our analysis of the way from GDP to welfare is based on the following illustration.

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MBAXIV A – MA 1407 – Business Economics in a Global Market GDP & Welfare – The Moroccan Example

2.1 GDP Purpose & Limitations
The great depression, the lack of information to stabilize the economy through fiscal or monetary policies and the need to assess the production possibilities in a war economy all led to the development of the national income and product accounts. First GDP data were out in 1942. However, till today, GDP only measure the market value of final good and services produced in a country, nothing more. First, GDP;...
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